London Daily

Focus on the big picture.
Sunday, Aug 10, 2025

Bank of England policymaker says rates could rise again in May

Bank of England policymaker says rates could rise again in May

Catherine Mann argues that soaring energy and food prices will persist even if consumer demand weakens
A senior Bank of England policymaker has said Britain’s central bank could raise rates again next month to combat the risk of high inflation persisting into 2023.

Catherine Mann, a former Citigroup economist who joined the BoE’s nine-strong monetary policy committee (MPC) last year, said on Thursday that soaring prices of energy and food will persist next year, even if consumer demand weakens.

Some economists have forecast that the UK economy will shrink in the second quarter and possibly fall into recession following a collapse in consumer and business confidence in the wake of Russia’s invasion of Ukraine that is likely to worsen shortages of goods and push inflation to fresh highs.

However, Mann said it was important for the central bank to calm inflation expectations, which were likely to drive demands for higher wages, pushing inflation even higher.

“The domestic inflation ratchet … has been my central concern,” she said in a speech.

In February when the MPC voted for a 0.25-point increase in the base rate she voted with a minority for a sharper 0.5-point rise. Last month she voted with almost all other members for a 0.25-point rise, taking the base rate to 0.75%.

She said: “Monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak.”

The BoE will meet on 5 May to decide on the path of interest rates at a time when most households have begun to absorb a rise in national insurance contributions and a freeze on income tax thresholds that will push hundreds of thousands of taxpayers into higher tax brackets.

Inflation hit a 30-year high of 7% in March, and the BoE last month warned that the bigger-than-expected pickup in prices would squeeze growth later this year.

However, Mann said it was not obvious to her that this fall in consumer demand would come soon enough to prompt businesses to rein in forthcoming price rises.

“Tracking these price expectations and forecast revisions is of paramount importance since inflation ultimately is due to firms systematically able to raise their prices,” she said.

Moreover, staged energy price increases designed to smooth the recent shock increase in wholesale costs would extend the period of high inflation. “The underlying inflation ratchet associated with lagged CPI [consumer price index] in firms’ pricing expectations will imply more persistence in keeping inflationary pressures above target,” she said.

Financial markets expect Mann and the rest of the MPC to increase the base rate to 2.25% by the end of the year. However, many economists expect the biggest collapse in real disposable household incomes since records began in 1948 to force a U-turn.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said: “We doubt the MPC will be so cavalier as to hike bank rate to 2.25%.” He said a 0.25-point rise in May and another in August would be the most UK borrowers could expect as the economic situation worsened.

Danny Blanchflower, a former MPC member and professor of economics at the US Ivy League university Dartmouth College, said the BoE would be blamed for depressing household incomes at a time of rising poverty.

Mann’s concern that inflation would persist, driven by an explosion in wage demands, was based on “no evidence”, he added. “There is nothing in the survey evidence to show that households or financial markets believe inflation is going to last and no evidence that workers have the clout to increase wages by more than inflation.

“All the evidence points to there being a recession around the corner driven by higher taxes, rising energy and food costs and an evidence-free increase in interest rates.”
Newsletter

Related Articles

0:00
0:00
Close
Street justice isn’t pretty but how else do you deal with this kind of insanity? Sometimes someone needs to standup and say something
Armenia and Azerbaijan sign U.S.-brokered accord at White House outlining transit link via southern Armenia
Barcelona Resolves Captaincy Issue with Marc-André ter Stegen
US Justice Department Seeks Release of Epstein and Maxwell Grand Jury Exhibits Amid Legal and Victim Challenges
Trump Urges Intel CEO Lip-Bu Tan to Resign Over Alleged Chinese Business Ties
Scotland’s First Minister Meets Trump Amid Visit Highlighting Whisky Tariffs, Gaza Crisis and Heritage Links
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
The AI-Powered Education Revolution: Market Potential and Transformative Impact
Chikungunya Virus Outbreak in Southern China: Over 7,000 Hospitalized
French wine makers have seen catastrophic damage to vines that were almost ready to be harvested after the worst fires in more than 70 years burned through the south of the country
US Lawmaker Probes Intel CEO’s China Ties Amid National Security Concerns
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
Trump Open to Meeting Putin as Soon as Next Week, with Possible Trilateral Summit Including Zelenskiy
Katy Perry and Justin Trudeau spark dating rumors, joining high stakes world of celeb-politician romances
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
Trump Signals JD Vance as ‘Most Likely’ MAGA Successor for 2028
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
Representative Greene Urges H-1B Visa Cuts Amid U.S.-India Trade Tensions
U.S. House Committee Subpoenas Clintons and Senior Officials in Epstein Investigation
Sydney Sweeney Registered as Republican as Controversial American Eagle Ad Sparks Debate
Trump Accuses Major Banks of Politically Motivated Account Denials and Prepares Executive Order
TikTok Removes Huda Kattan Video Over Anti-Israel Conspiracy Claims
Trump Threatens Tariffs on India Over Russian Oil Imports
German Finance Minister Criticizes Trump’s Attacks on Institutions
U.S. Proposes Visa Bond of Up to $15,000 for Some Applicants
U.S. Farmers Increase Lobbying Amid Immigration Crackdown
Elon Musk Receives $23.7 Billion Tesla Stock Award
Texas House Paralyzed After Democrats Walk Out Over Redistricting
Mexican Cartels Complicate Sheinbaum’s U.S. Security Talks
Mark Zuckerberg Declares War on the iPhone
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
×